Performant Financial Corporation (Nasdaq: PFMT), (the
"Company"), a leading provider of technology-enabled recovery and
related analytics services in the United States, today reported the
following financial results for its third quarter ended September
30, 2020:
Third quarter Financial Highlights
- Total revenues of $36.2 million, compared to revenues of $35.9
million in the prior year period
- Net income of approximately $2.0 million, or $0.04 per diluted
share, compared to a net loss of $8.1 million, or $(0.15) per
diluted share, in the prior year period.
- Adjusted net income was $3.2 million, or $0.06 per diluted
share, compared to an adjusted net loss of $7.3 million or $(0.14)
per diluted share in the prior year period
- Adjusted EBITDA of $3.8 million, compared to $(3.1) million in
the prior year period
Third quarter 2020 Results
Total revenues in the third quarter were $36.2 million, an
increase of $0.3 million, or 1% from revenues of $35.9 million in
the prior year period. Healthcare revenues in the third quarter of
2020 were $17.6 million, an increase of $6.8 million, or 63%, from
revenues of $10.8 million in the prior year period. Recovery
revenues in the third quarter were $15.4 million, a decrease of
$5.5 million, or 26%, from revenues of $20.9 million in the prior
year period. Revenues from our Customer Care / Outsourced Services
in the third quarter were $3.2 million, a decrease of $1.0 million,
or 24%, from revenues of $4.2 million in the prior year period.
Net income for the third quarter was $2.0 million, or $0.04 per
share on a diluted basis, compared to net loss of $8.1 million, or
$(0.15) per share on a diluted basis, in the prior year period.
Adjusted net income for the third quarter was $3.2 million, or
$0.06 per share on a diluted basis, compared to an adjusted net
loss of $7.3 million, or $(0.14) per diluted share, in the prior
year period. Adjusted EBITDA for the third quarter was $3.8 million
as compared to $(3.1) million in the prior year period.
As of September 30, 2020, the Company had cash, cash equivalents
and restricted cash of approximately $17.3 million.
Business Commentary and Outlook
“Our results in the third quarter reflect the resiliency of our
businesses as well as our overall management of operational
workflows throughout this pandemic,” stated Lisa Im, CEO of
Performant. “COVID-19 continues to affect multiple aspects of our
business. Within Healthcare, the pandemic related disruption were
limited to our audit work. Within Recovery, we received work
stoppage requests from multiple clients, and the U.S. Federal
government has suspended the involuntary collections of payments
for student loans originated by the Department of Education through
December 31,2020. Thankfully, the majority of these work stoppages
across our Healthcare and Recovery businesses, with the exception
of the moratorium on student loans collections, were lifted during
the third quarter, and we have resumed ramping back up with most of
these clients.”
“Furthermore, we recently announced, and are excited about the
progress we have made with our Premium Accuracy offering, a
Medicare Secondary Payer (MSP) service for Medicare Advantage
Plans. With over four million lives already under contract, we
anticipate that figure to grow as additional payers are attracted
to our exceptional speed to savings, which is made possible by the
combination of our proprietary platform and extensive knowledge in
the Medicare Secondary Payer space,” continued Im.
Note Regarding Use of Non-GAAP Financial Measures
In this press release, to supplement our consolidated financial
statements, the Company presents adjusted EBITDA, adjusted net
income (loss), and adjusted net income (loss) per diluted share.
These measures are not in accordance with accounting principles
generally accepted in the United States of America (US GAAP) and
accordingly reconciliations of adjusted EBITDA and adjusted net
income (loss) to net income (loss) determined in accordance with US
GAAP are included in the “Reconciliation of Non-GAAP Results” table
at the end of this press release. We have included adjusted EBITDA
and adjusted net income (loss) in this press release because they
are key measures used by our management and board of directors to
understand and evaluate our core operating performance and trends
and to prepare and approve our annual budget. Accordingly, we
believe that adjusted EBITDA and adjusted net income (loss) provide
useful information to investors and analysts in understanding and
evaluating our operating results in the same manner as our
management and board of directors. Our use of adjusted EBITDA and
adjusted net income (loss) has limitations as an analytical tool
and should not be considered in isolation or as a substitute for
analysis of our results as reported under US GAAP. In particular,
many of the adjustments to our US GAAP financial measures reflect
the exclusion of items, specifically interest, tax and depreciation
and amortization expenses, equity-based compensation expense and
certain other non-operating expenses, that are recurring and will
be reflected in our financial results for the foreseeable future.
In addition, these measures may be calculated differently from
similarly titled non-GAAP financial measures used by other
companies, limiting their usefulness for comparison purposes.
Earnings Conference Call
The Company will hold a conference call to discuss its third
quarter 2020 results today at 5:00 p.m. Eastern. A live webcast of
the call may be accessed on the Investor Relations section of the
Company’s website at investors.performantcorp.com. The conference
call is also available by dialing 877-705-6003 (domestic) or
201-493-6725 (international).
A replay of the call will be available on the Company's website
or by dialing 844-512-2921 (domestic) or 412-317-6671
(international) and entering the passcode 13712903. The telephonic
replay will be available approximately three hours after the call,
through November 17, 2020.
About Performant Financial Corporation
Performant helps government and commercial organizations enhance
revenue and contain costs by preventing, identifying and recovering
waste, improper payments and defaulted assets. Performant is a
leading provider of these services in several industries, including
healthcare, student loans and government. Performant has been
providing recovery audit services for more than nine years to both
commercial and government clients, including serving as a Recovery
Auditor for the Centers for Medicare and Medicaid Services.
Powered by a proprietary analytic platform and workflow
technology, Performant also provides professional services related
to the recovery effort, including reporting capabilities, support
services, customer care and stakeholder training programs meant to
mitigate future instances of improper payments. Founded in 1976,
Performant is headquartered in Livermore, California.
Forward Looking Statements
This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding our outlook for revenues,
net income (loss), and adjusted EBITDA in 2020 and beyond. These
forward-looking statements are based on current expectations,
estimates, assumptions and projections that are subject to change
and actual results may differ materially from the forward-looking
statements. Factors that could cause actual results to differ
materially include, but are not limited to, the material adverse
impact of the COVID-19 pandemic on our business, results of
operations and financial condition as well as on the business
operations and financial performance of many of our customers, that
the Company may not have sufficient cash flows from operations to
fund ongoing operations and other liquidity needs, that the
Company’s indebtedness could adversely affect its business and
financial condition and could reduce the funds available for other
purposes and the failure to comply with covenants contained in its
credit agreement could result in an event of default that could
adversely affect its results of operations, that the Company faces
a long period to implement a new contract which may result in the
incurring of expenses before the receipt of revenues from new
client relationships, the high level of revenue concentration among
the Company's largest customers and any termination in the
Company’s relationship with any of our significant clients would
result in a material decline in our revenues, that many of the
Company's customer contracts are subject to periodic renewal, are
not exclusive, do not provide for committed business volumes and
may be changed or terminated unilaterally and on short notice, that
the Company may not be able to manage its potential growth
effectively, that the Company faces significant competition in all
of its markets, that continuing limitations on the scope of our
audit activity under our RAC contracts have significantly reduced
our revenue opportunities with this client, that the U.S. federal
government accounts for a significant portion of the Company's
revenues, that future legislative and regulatory changes may have
significant effects on the Company's business, that failure of the
Company's or third parties' operating systems and technology
infrastructure could disrupt the operation of the Company's
business and the threat of breach of the Company's security
measures or failure or unauthorized access to confidential data
that the Company possesses. More information on potential factors
that could affect the Company's financial condition and operating
results is included from time to time in the "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" sections of the Company's annual report on
Form 10-K for the year ended December 31, 2019 and subsequently
filed reports on Forms 10-Q and 8-K. The forward-looking statements
are made as of the date of this press release and the Company does
not undertake to update any forward-looking statements to conform
these statements to actual results or revised expectations.
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share
amounts)
September 30,
2020
December 31,
2019
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
15,655
$
3,373
Restricted cash
1,622
1,622
Trade accounts receivable, net of
allowance for doubtful accounts of $21 and $237, respectively
22,414
27,170
Contract assets
2,862
1,339
Prepaid expenses and other current
assets
2,846
3,329
Income tax receivable
3,719
164
Total current assets
49,118
36,997
Property, equipment, and leasehold
improvements, net
17,647
18,769
Identifiable intangible assets, net
748
925
Goodwill
47,372
74,372
Right-of-use assets
4,948
6,834
Other assets
1,160
975
Total assets
$
120,993
$
138,872
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of notes payable to
related party, net of unamortized debt issuance costs of $1,285 and
$130, respectively
$
60,440
$
3,320
Accrued salaries and benefits
5,045
6,126
Accounts payable
1,372
2,532
Other current liabilities
4,199
3,576
Deferred revenue
1,062
83
Estimated liability for appeals and
disputes
1,033
1,018
Lease liabilities
2,338
2,775
Total current liabilities
75,489
19,430
Notes payable to related party, net of
current portion and unamortized debt issuance costs of $0 and
$2,301, respectively
—
58,562
Earnout payable
375
475
Lease liabilities
3,514
4,984
Other liabilities
3,962
1,796
Total liabilities
83,340
85,247
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value.
Authorized, 500,000 shares at September 30, 2020 and December 31,
2019 respectively; issued and outstanding 54,735 and 53,900 shares
at September 30, 2020 and December 31, 2019, respectively
5
5
Additional paid-in capital
82,326
80,589
Accumulated deficit
(44,678
)
(26,969
)
Total stockholders’ equity
37,653
53,625
Total liabilities and stockholders’
equity
$
120,993
$
138,872
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Revenues
$
36,228
$
35,903
$
115,901
$
106,609
Operating expenses:
Salaries and benefits
23,522
28,771
74,493
86,816
Other operating expenses
10,813
12,948
32,075
37,112
Impairment of goodwill
—
—
27,000
—
Total operating expenses
34,335
41,719
133,568
123,928
Income (loss) from operations
1,893
(5,816
)
(17,667
)
(17,319
)
Interest expense
(1,569
)
(2,166
)
(5,827
)
(5,260
)
Interest income
6
11
18
33
Income (loss) before provision for
(benefit from) income taxes
330
(7,971
)
(23,476
)
(22,546
)
Provision for (benefit from) income
taxes
(1,644
)
99
(5,767
)
412
Net income (loss)
$
1,974
$
(8,070
)
$
(17,709
)
$
(22,958
)
Net income (loss) per share
Basic
$
0.04
$
(0.15
)
$
(0.33
)
$
(0.43
)
Diluted
$
0.04
$
(0.15
)
$
(0.33
)
$
(0.43
)
Weighted average shares
Basic
54,684
53,665
54,299
53,366
Diluted
54,710
53,665
54,299
53,366
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash
Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2020
2019
Cash flows from operating
activities:
Net loss
$
(17,709
)
$
(22,958
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Loss on disposal of assets
88
7
Impairment of goodwill
27,000
—
Depreciation and amortization
4,072
6,698
Right-of-use assets amortization
1,886
1,913
Stock-based compensation
1,997
1,743
Interest expense from debt issuance
costs
1,145
896
Earnout mark-to-market
(162
)
(1,086
)
Changes in operating assets and
liabilities:
Trade accounts receivable
4,756
354
Contract assets
(1,523
)
(1,159
)
Prepaid expenses and other current assets
and other assets
298
(219
)
Income tax receivable
(3,555
)
179
Accrued salaries and benefits
(1,081
)
1,236
Accounts payable
(1,160
)
460
Deferred revenue and other current
liabilities
1,664
280
Estimated liability for appeals and
disputes
15
159
Lease liabilities
(1,907
)
(2,066
)
Other liabilities
2,168
187
Net cash provided by (used in) operating
activities
17,992
(13,376
)
Cash flows from investing
activities:
Purchase of property, equipment, and
leasehold improvements
(2,862
)
(4,101
)
Net cash used in investing activities
(2,862
)
(4,101
)
Cash flows from financing
activities:
Repayment of notes payable
(2,588
)
(1,750
)
Debt issuance costs paid
—
(68
)
Taxes paid related to net share settlement
of stock awards
(260
)
(466
)
Proceeds from exercise of stock
options
—
34
Borrowings from notes payable
—
21,000
Net cash (used in) provided by financing
activities
(2,848
)
18,750
Net increase in cash, cash equivalents and
restricted cash
12,282
1,273
Cash, cash equivalents and restricted cash
at beginning of period
4,995
7,275
Cash, cash equivalents and restricted cash
at end of period
$
17,277
$
8,548
Reconciliation of the Consolidated
Statements of Cash Flows to the Consolidated Balance
Sheets:
Cash and cash equivalents
$
15,655
$
6,888
Restricted cash
1,622
1,660
Total cash, cash equivalents and
restricted cash at end of period
$
17,277
$
8,548
Non-cash financing activities:
Recognition of warrants issued in debt
financing
$
—
$
1,165
Supplemental disclosures of cash flow
information:
Cash received for income taxes
$
2,280
$
87
Cash paid for interest
$
4,616
$
4,363
PERFORMANT FINANCIAL
CORPORATION AND SUBSIDIARIES
Reconciliation of Non-GAAP
Results
(In thousands, except per share
amount)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Adjusted EBITDA:
Net income (loss)
$
1,974
$
(8,070
)
$
(17,709
)
$
(22,958
)
Provision for (benefit from) income
taxes
(1,644
)
99
(5,767
)
412
Interest expense (1)
1,569
2,166
5,827
5,260
Interest income
(6
)
(11
)
(18
)
(33
)
Depreciation and amortization
1,277
2,141
4,072
6,698
Impairment of goodwill (5)
—
—
27,000
—
Non-core operating expenses (7)
—
244
—
309
Earnout mark-to-market (6)
—
(174
)
(162
)
(1,086
)
Stock-based compensation
657
525
1,997
1,743
Adjusted EBITDA
$
3,827
$
(3,080
)
$
15,240
$
(9,655
)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Adjusted Net Income (Loss):
Net income (loss)
$
1,974
$
(8,070
)
$
(17,709
)
$
(22,958
)
Stock-based compensation
657
525
1,997
1,743
Amortization of intangibles (2)
58
65
176
176
Impairment of goodwill (5)
—
—
27,000
—
Deferred financing amortization costs
(3)
249
353
1,145
896
Earnout mark-to-market (6)
—
(174
)
(162
)
(1,086
)
Tax adjustments (4)
265
(279
)
(8,293
)
(561
)
Adjusted net income (loss)
$
3,203
$
(7,336
)
$
4,154
$
(21,481
)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Adjusted Net Income (Loss) Per Diluted
Share:
Net income (loss)
$
1,974
$
(8,070
)
$
(17,709
)
$
(22,958
)
Plus: Adjustment items per reconciliation
of adjusted net income (loss)
1,229
734
21,863
1,477
Adjusted net income (loss)
3,203
(7,336
)
4,154
(21,481
)
Adjusted net income (loss) per diluted
share
$
0.06
$
(0.14
)
$
0.08
$
(0.40
)
Diluted average shares outstanding (7)
54,710
53,665
54,363
53,366
(1)
Represents interest expense and
amortization of issuance costs related to the refinancing of our
indebtedness.
(2)
Represents amortization of intangibles
related to the acquisition of Performant by an affiliate of
Parthenon Capital Partners in 2004.
(3)
Represents amortization of capitalized
financing costs related to our Credit Agreement.
(4)
Represents tax adjustments assuming a
marginal tax rate of 27.5% at full profitability.
(5)
Represents a non-cash goodwill impairment
charge in 2020 mainly due to the decrease of our market
capitalization in the first half of 2020.
(6)
Represents the change from prior reporting
periods in the fair value of the potential earnout consideration
payable to ECMC group in connection with the Premiere
acquisition.
(7)
While net loss for the nine months ended
September 30, 2020 is ($17,553), the computation of adjusted net
income (loss) results in adjusted net income of $4,154. Therefore,
the calculation of the adjusted net income per diluted share for
the nine months ended September 30, 2020 includes dilutive common
share equivalents of 64 added to the basic weighted average shares
of 54,299.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201110006058/en/
Richard Zubek Investor Relations 925-960-4988
investors@performantcorp.com
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